Money Supply and LM Curve

Dear all,

A quick question on Money Supply and LM Curve.

Question 1: A change in interest rate, r or a change in real income, Y is represented by a movement up/down the LM curve? The LM curve itself does not move, right?

Question 2: If real money supply, M/P changes, the LM curve will shift; right?

I have quite a hard time understanding what are the variables involved in shifting LM curve.

Thank you.



You’re correct on both counts.

I wrote an article on the LM curve that may be of some help: